FX.co ★ South Korea’s Economy Unexpectedly Contracts in Q1

In the first quarter of 2025, South Korea's economy experienced a contraction of 0.2% quarter-on-quarter, contrary to predictions of a slight 0.1% growth. This downturn is occurring amidst increased political uncertainty domestically and the economic repercussions of extensive U.S. tariffs. From an expenditure perspective, private consumption decreased by 0.1%, mainly due to reduced spending in sectors like entertainment, cultural activities, and healthcare. Similarly, government consumption saw a 0.1% decline, primarily because of reduced healthcare benefit expenditures. The construction sector took a significant hit, with investment plummeting by 3.2%, largely reflecting diminished building activities. At the same time, facilities investment fell by 2.1%, marked by a significant drop in machinery acquisitions, particularly those related to semiconductor manufacturing equipment. The export sector saw a decrease of 1.1%, burdened by reduced shipments in chemicals and machinery, while imports declined by 2.0%, attributable to a decreased demand for energy products such as crude oil and natural gas.